Judge says bankrupt B.C. man can't escape repaying student loans

CP

KAMLOOPS, B.C. - A former university student who declared bankruptcy must repay his student loans, a B.C. Supreme Court judge has ruled.

The decision by Justice Geoffrey Gaul overturns an earlier ruling by a B.C. Supreme Court master, who determined Douglas Mallory’s first round of student loans were discharged with his 2008 bankruptcy.

The province appealed the decision.

In the earlier decision, the master determined Mallory stopped being a full-time student at the University College of the Cariboo in Kamloops, later named Thompson Rivers University, in 2001, when he graduated with a bachelor of arts degree.

The time span between 2001 and 2008 fulfils the requirement under the Bankruptcy and Insolvency Act, which says students must have been out of school for at least seven years in order to discharge student loan debt.

However, Mallory then went on to the University of Victoria, where he got a teaching degree.

A month after graduating, he declared bankruptcy.

Mallory's Canada and B.C. loans while attending University College of the Cariboo totalled $38,000, and his debts from UVic added another $20,000.

Mallory did not seek to escape paying the debts accrued in Victoria, only the loans from the first university he attended.

Gaul ruled the seven-year requirement dates from the end of Mallory’s studies at UVic in 2008, rather than University College of the Cariboo in 2001.

“I fail to see why a period of time between studies is of consequence,” Gaul said in his ruling.

“The question is not how long a gap has there been or even if the period of studies has been successful. The question is, when did the bankrupt stop being a student?”

The answer to that question, Gaul noted, is 2008, when Mallory graduated from UVic with a teaching degree.

According to the judgment, Mallory worked at a number of jobs between stints in university, including driving a shuttle van and operating his own business.

Following graduation with a teaching degree, he worked as a camp leader and substitute teacher two to three days a week.

He was discharged from bankruptcy in 2009.

Jeannine Mitchell, who operates a website called Debt 101 on student finances and debt, said the law around hardship and bankruptcy for students is complex.

She said students should expect to pay back everything they borrowed.

“However, life does not always follow our plans,” Mitchell said in an email.

“Sometimes people face hardship in later years and really are eligible for bankruptcy that includes the remainder of their student loan debt.”

In some cases, students may be relieved of student loan debt under a five-year rule.

“Because of the failed attempts I’ve seen, I would caution them to avoid any bankruptcy trustees who lack a track record of successful student loan cases,” Mitchell said.

While Mallory must repay the province’s portion of loans for his studies at the first university, he will not be required to pay back the federal portion of the $38,000 because the federal government did not appeal the master’s decision. (Kamloops This Week)